New Coronavirus Variant, High Supply to Hit Crude Oil Prices

Crude oil experienced sharp fall during Asian trading with the ICE Brent Futures dropping by close to 5% owing to heightened concerns of over supply during the first quarter of 2022. The rise in the supply is expected to be triggered by US led inventory release plans by the leading consumers. Another reason for price fall is the bearish demand fundamentals which are expected to develop owing to the new coronavirus variant related fourth wave of the pandemic.

In a joint effort several countries including US, China, India, South Korea, Japan, and the UK have agreed to release more Crude Oil from their strategic reserves in order to cap the rising prices of Crude Oil.

Crude oil is a hydrocarbon-rich liquid fuel residing in deep reservoirs under the Earth’s crust which is collected using the drilling process and refined to form extremely important fuels like gasoline, diesel, heating oil etc., which are used in powering transport, generating electricity and heating purposes. Crude oil is also a major feedstock for the production of various grades of plastics, petrochemicals, speciality chemicals, fertilizers, and pharmaceutical products.

As per ChemAnalyst, “the crude oil prices are expected to fluctuate mildly and maintain a dropping trajectory as the strategic reserves released from the respective countries which will eventually raise the supply in the market. with the new variant of coronavirus hitting several countries, the demand for crude oil is expected to take a hit during the first quarter of 2022.”